WASHINGTON, DC, June 26 -- Canada's unconventional oil reserves and their accelerated development could eventually undermine the Organization of Petroleum Exporting Countries' influence on world oil prices, suggested a report released on June 26 by Congress's Joint Economic Committee (JEC).
"The large Canadian reserves of unconventional oil and their rapid development is very good news for consumers in the United States and around the world, said Rep. Jim Saxton (R-NJ), JEC's chairman. "While these reserves can supply only a limited amount of oil at the current time, their development is exactly the kind of thing the OPEC cartel has hoped to avoid."
The report noted that Canada's 1 million b/d of production from oil sands already equals Qatar's total oil production. "Including conventional oil, Canada's production currently ranks seventh in the world [at] 3.1 million b/d," it said.
Citing OGJ's annual worldwide production report for 2005, JEC's study said that Canada's 174.1 billion bbl of oil sands and 4.7 billion of conventional oil reserves rank it second, behind Saudi Arabia with its 264.3 billion bbl of reserves (OGJ, Dec. 19, 2005, p. 24).
"In addition, it is estimated that as-yet unproven quantities of oil thought to be recoverable from the Alberta sands would bring potential reserves to 315 billion bbl out of a total resource base of 1.7-2.5 trillion bbl," it added.
JEC's study conceded that a rapid increase in the scale of oil sands production is pushing short-term costs higher. But it suggested that input markets and the infrastructure will catch up and, combined with technical advances, stabilize the cost per barrel.
"At that point, given the high reserves, the oil sands supply will set an upper limit to the world price that OPEC can no longer exceed," it said, adding that this would not happen for at least another decade "and the timing beyond that will depend on OPEC's output decisions in the interim."
The report listed four conditions that it said bode well for development of Canada's oil sand reserves:
-- A privatized oil sector with assured property rights and a reasonable royalty regime.
-- Oil sands producers that are price-takers and subject to laws governing competition similar to those in the US.
-- Secure and efficient oil export routes.
-- Transparency in oil reserve estimates, production activity, and development plans.
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